Retreat Into Recent Rate Range Continues
The opening commentary is surprisingly similar to the closing commentary. Bonds were already pushing back into their prevailing range with 3.45 or 3.50% as the floor for 10yr yields, depending on your preference. This morning’s data provided an unfriendly nudge in the same direction. MBS outperformed with Treasuries not only anxious about early auctions next week, but also in curve steepening mode (i.e. 2yr yields only rose 3bps whereas 10s rose almost 10bps). All of the movement was/is small potatoes compared to what we will likely see next week after CPI on Tuesday and the Fed on Wednesday.
Econ Data / Events
Monthly Core PPI
0.4 vs 0.2 f’cast, 0.1 prev
7.4 vs 7.2 f’cast
Annual Core PPI
6.2 vs 5.9 f’cast, 6.8 prev
Market Movement Recap
08:35 AM Slightly stronger overnight, but moving into weaker territory after PPI came in hotter. MBS down 1-2 ticks (0.03-0.06) and 10yr yield up 2.3 bps at 3.512.
10:26 AM Additional weakness after Consumer Sentiment data. 10yr up almost 7bps at 3.556. MBS down just under a quarter point, but still illiquid (i.e. losses might not be quite that big by the time liquidity improves).
01:48 PM Fairly flat at weaker levels. MBS down an eighth and 10yr yields still up 7bps at 3.556
05:12 PM Just a bit more weakness into the close. Treasuries seem anxious about next week’s early auction cycle with 10s up almost 10bps at 3.586. MBS are still only down about a quarter point at the close.